Market Wraps

Morning Wrap: ASX 200 to slip, S&P 500 marks worst seek since March

Mon 25 Sep 23, 8:38am (AEDT)

ASX 200 futures are trading 18 points lower, down -0.25% as of 8:20 am AEST.

The local sharemarket is set to fall after a powerful reversal last Friday, major US benchmarks tried to bounce but finished in red, Bank of America flags major equity market outflows for the week ended 20 September, rate cut expectations continue to get pushed back and soft commodity prices are soaring.

Let's dive in.

Overnight Summary

Mon 25 Sep 23, 8:38am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,320 -0.23%
Dow Jones 33,964 -0.31%
NASDAQ Comp 13,212 -0.09%
Russell 2000 1,777 -0.30%
Country Indices
Canada 19,780 -0.06%
China 3,132 +1.55%
Germany 15,557 -0.09%
Hong Kong 18,057 +2.28%
India 66,009 -0.33%
Japan 32,402 -0.52%
United Kingdom 7,684 +0.07%
Name Value Chg %
Commodities (USD)
Gold 1,944.90 +0.27%
Iron Ore 121.33 -
Copper 3.694 -0.05%
WTI Oil 90.33 +0.78%
Currency
AUD/USD 0.6442 +0.00%
Cryptocurrency
Bitcoin (AUD) 41,136 -0.27%
Ethereum (AUD) 2,466 -0.28%
Miscellaneous
US 10 Yr T-bond 4.438 -0.94%
VIX 17 -1.94%

US Sectors

Mon 25 Sep 23, 8:38am (AEDT)

Sector Chg %
Information Technology +0.26%
Energy +0.15%
Communication Services -0.09%
Materials -0.13%
Utilities -0.16%
Health Care -0.19%
Industrials -0.34%
Consumer Staples -0.47%
Real Estate -0.72%
Financials -0.74%
Consumer Discretionary -0.87%

S&P 500 SESSION CHART

S&P 500 intraday chart
S&P 500 tries to bounce but fails (Source: TradingView)

MARKETS

  • S&P 500 fails to hold a positive open, closing at worst levels on Friday

  • S&P 500 fell 2.9% last week, led by notably weekly declines from Tesla (-10.8%), Amazon (-8.0%) and Alphabet (-5.2%)

  • Broad-based risk-off week as the oversold bounce failed to gain traction

  • WTI crude down 1.0% last week after three straight weeks of gains

  • Bullish focus points for the week: S&P 500 most oversold in almost a year, Fed continues to hit pause, upbeat M&A and IPO activity with Cisco acquiring Splunk for US$28bn cash, UAW progress at Ford, more China policy support and cooler-than-expected UK inflation

  • Bearish focus points for the week: Fed dot point removes 50 bps of easing expectations in 2024, more upward pressure on rates with the 10-year yield briefly topping 4.5%, hotter-than-expected Canadian inflation, large equity outflows, dampened megacap tech momentum 

  • Global equity funds saw outflows of US$16.9bn for the week-ended 20 Sep, the most since December 2022 (Bloomberg)

  • US stocks fall most in six months after recent yield surge (Bloomberg)

  • US government debt headed for third year of losses (Bloomberg)

  • US investors bullish on Japanese stocks (Yahoo)

STOCKS

  • Qualcomm slashes jobs in China and Taiwan on smartphone slump (Nikkei)

  • Microsoft unveils new products, shared details of Copilot AI tool (CNBC)

  • Apple to scale up India production five-fold to US$40bn (Bloomberg)

  • Berkshire Hathaway sells another 4.8m shares of HP after sale of 5.5m shares in mid-Sep (Yahoo)

CENTRAL BANKS

  • Global central banks unite in "higher for longer" message (Reuters)

  • BOJ leaves policy settings unchanged, maintains guidance (Bloomberg)

  • ECB's Stournaras says rates have likely peaked, next move is a cut (Reuters)

  • ECB's Lane says Eurozone rates will be restrictive as long as necessary (Bloomberg)

  • BoE's Bailey says it's premature to talk about rate cuts (Bloomberg)

CHINA

  • China mulls easing foreign stake limits to lure global funds (Bloomberg)

  • China seeks to facilitate capital flows to woo foreign investors (Bloomberg)

  • China investors rush into local government bonds as Beijing eases default fears (FT)

ECONOMY

  • Eurozone PMIs flag fourth consecutive month of falling output (Bloomberg)

  • UK retail sales rebound in August (FT)

  • UK consumer confidence climbs to highest in almost two years (Bloomberg)

  • Japan core inflation broadly stable in August (Reuters)

  • Japan PMIs show manufacturing slump, service sector growth slows (Reuters)

Industry ETFs

Mon 25 Sep 23, 8:38am (AEDT)

Description Last Chg %
Commodities
Uranium 26.79 +3.56%
Strategic Metals 67.15 +1.30%
Lithium & Battery Tech 54.77 +0.75%
Silver 21.58 +0.65%
Steel 65.2137 +0.46%
Copper Miners 36.45 -0.14%
Gold Miners 28.87 -0.14%
Industrials
Construction 50.34 +0.04%
Agriculture 21.86 -0.18%
Aerospace & Defense 106.13 -0.92%
Global Jets 17.17 -1.09%
Healthcare
Biotechnology 122.56 -0.40%
Cannabis 6.78 -1.31%
Description Last Chg %
Cryptocurrency
Bitcoin 13.62 -0.37%
Renewables
CleanTech 11.16 -0.36%
Hydrogen 7.59 -0.91%
Solar 52.82 -1.44%
Technology
Video Games/eSports 50.65 +1.24%
Semiconductor 466.06 +0.83%
E-commerce 17.82 +0.68%
Robotics & AI 24.57 +0.45%
Electric Vehicles 23.46 +0.39%
Cybersecurity 24.3 +0.33%
Cloud Computing 18.81 +0.27%
FinTech 20.07 -0.20%
Sports Betting/Gaming 16.1902 -0.94%

Rate Cuts Get Priced Out

Fed fund futures are now pricing in rate cuts at the beginning of July 2024.

Back in May, the probabilities were expecting three rate cuts this year.

The Fed has pushed back against rate cuts since the hiking cycle began in March 2022 while the market continues to doubt them. After Powell's hawkish pause last week, the odds of another hike jumped to 40.7%.

The markets are getting humbled as yields break out to levels not seen since 2007. But will it get complacent and forget about higher-for-longer in a few weeks time?

F6psfgqaUAABGhj
Source: CME

More Food Inflation Is Coming

In terms of commodities, we're often fixated on iron ore, copper and oil. But a lot of soft commodities are absolutely exploding.

  • Cattle prices are up around 20% year-to-date to the highest level on record

  • Olive oil prices have more than doubled in the past twelve months

  • Orange juice prices are up 70% year-to-date

  • Sugar prices are up 31% year-to-date, a few percentage points off record levels

This is all happening against a backdrop where oil prices are trading above US$90 a barrel.

Australia's monthly inflation indicator reported food inflation sitting at 5.6% in July, down from 7.0% in June and 7.9% in May. But given the above advances, the fight against inflation still has a long way to go.

Sectors to Watch: Uranium

Not the most exciting overnight session. Major US benchmarks tried to bounce but failed. So will we see similar weakness on the ASX? It's worth noting that the Index reversed a 1.5% decline last Friday to close around breakeven.

Uranium was the best performing sector in our overnight ETF list. The Global X Uranium ETF rallied 3.56% last Friday to finish marginally higher for the week, marking a fifth straight week of gains to levels not seen since April 2022. Could this see some positive flow for local names like Boss Energy (ASX: BOE), Paladin Energy (ASX: PDN) and Deep Yellow (ASX: DYL).

There was a headline over the weekend about 'Microsoft Cloud hiring to "implement global small modular reactor and micro-reactor" strategy to power data centers". Big data centres require massive amounts of consistent power and there is currently a lack of stable energy (whether that's clean or dirty). Nuclear might be the solution.

URA
Global X Uranium ETF weekly chart (Source: TradingView)

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Sigma Healthcare (SIG) – $0.005, Atlas Arteria (ALX) – $0.20, Auckland International Airport (AIA) – $0.03 

  • Dividends paid: Suncorp (SUN) – $0.27, Step One Clothing (STP) – $0.05

  • Listing: None

Economic calendar (AEST):

No major economic announcements. 

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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